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Just one year after hiring their first employee, executives at
online discount site FatWallet realized they needed more staffers
to handle the company's rapid growth. "We needed IT staff
and programmers, and we knew that in our area, we'd have to take
them from larger companies," says April Kunzelman, human
resources director for the Beloit, Wis.-based company.

Kunzelman also knew that to lure talent from more established
companies, FatWallet would have to beef up its employee benefits
package. "We knew we couldn't compete if we didn't offer, at the
very least, health insurance. So we immediately began putting an
employee benefits plan in place," she says.

Today, FatWallet boasts a progressive benefits package that
includes health, dental and disability insurance, paid time off
and a host of other amenities, including free daily lunches for
its nearly 60 employees.

As Kunzelman and her peers have found, a strong employee benefits
package is a powerful tool for attracting and retaining the best
workers. In a 2011 Harvard Business Review Analytic Services
survey of human resource leaders, 60 percent said an attractive
benefits package is "very important" in recruiting and retaining
quality employees, vs. only 38 percent who said a high base
salary is very important.

Benefits play an integral role in employee satisfaction. In its
most recent annual trends survey, MetLife found that roughly 49
percent of employees polled said benefits were an important
reason they came to work for a company, while 60 percent said
benefits are an important reason for staying.

While the cost and compliance of crafting benefits packages may
seem daunting for small-business owners, experts agree they pay
dividends in terms of long-term success. There are no easy
formulas, because each entrepreneur needs a program tailored to
his or her company and employees. But there are some universal
guidelines.

Getting Started
Christopher Delorey, senior vice president at employee benefits
consultancy Bostonian Group, says employers typically start
looking to round out a basic compensation package with benefits
when they have six to 10 employees they wish to retain, as well
as when they want to attract new ones. "You don't necessarily
have to have health insurance the minute you open your doors," he
says.

Medical insurance tops the list of employee demands. According to
The Principal Financial Group's benefits study for fourth-quarter
2011, health insurance is deemed the most important benefit by 90
percent of employees.

Medical and retirement plans can take many shapes and sizes to
meet the goals of any company, according to Lisa Wintersheimer
Michel, a partner specializing in employee benefits at law firm
Keating Muething & Klekamp in Cincinnati. "From a fully
insured health product to a flexible spending account to a 401(k)
to a simplified employee pension plan, there are many different
options and levels depending on what you're interested in
providing, what you can pay and the size of your group," Michel
says.

Once the major benefits components are in place, it's fairly easy
and cost-effective to include other popular programs such as
vision insurance, life insurance and long- or short-term
disability.

One benefit that's growing in popularity, in part because it is
so well-suited to small businesses and startups, is flexibility.
"With so many personal demands on workers today, a flexible work
schedule is a big plus in a benefits package," Delorey says.

In fact, a study by the New York-based Families and Work
Institute found that the majority of professional and
nonprofessional employees--87 percent--say having the flexibility
they need to manage their work and personal lives would be
"extremely" or "very" important if they were looking for a new
job.

FatWallet addresses that need with its so-called "no miss"
guidelines, wherein employees are instructed to never miss
important family or school events for work. "It doesn't cost us
any money, and people really appreciate it," Kunzelman says.
"Flexibility pays huge benefits for a small company like us."

While some benefits may be out of reach for small businesses, a
little creativity can lead to similar, less expensive options
that can have just as big an impact on employee morale and
loyalty.

If you can't offer: tuition
reimbursement
Try: a compressed, four-day workweek that
gives employees time to pursue a degree on their own

If you can't offer: paid vacation
Try: job sharing, in which two part-time
employees share the same full-time position, or wellness
programs that include sleep breaks and massages

If you can't offer: on-site child care
Try: negotiating with a nearby child-care
center for a discounted group rate

If you can't offer: an on-site fitness
facility
Try: a lunch-hour walking club or discounted
local gym memberships

If you can't offer: counseling services
Try: allowing employees to bring their pets to
work, which has been shown to reduce stress

Outside Help
No matter what benefits you want to offer, there are many
resources for small-business owners to educate themselves. While
valuable information can be found at websites such as the
National Association of Health
Underwriters and SCORE,most businesses enlist the aid of an
insurance broker or employee benefits consultant to help them
understand and evaluate various products, particularly as
regulations and possibilities vary from state to state.

"The options can be vastly different, so you're often comparing
apples and oranges," Michel says. "These professionals can help
you compare different products and understand the costs as well
as determine what makes sense for your organization."

To make sure they find the best options and providers, Michel
says employers should ask questions about each product's cost,
what it covers and how the benefit is delivered.

"You need to understand exactly what you're getting and how it's
going to work," she says. "How is the benefit delivered? What
resources are available to help both the employer and the
employees? How and how quickly are claims going to get paid? And
what happens if there's a claim dispute? It's important to
understand the entire process."

It's also important for employers to ask about the legal
obligations they incur by offering those benefits. "When you set
up these plans, there's a set of laws you're required to comply
with, like [the Employee Retirement Income Security Act], that
you must understand," Michel says.

Of course, the most important questions to ask are the ones
related to your specific business needs. For FatWallet, Kunzelman
asked if she could speak to another client with the same health
insurance provider to get a sense of its customer service. "The
thing that drives employees insane is not being able to get their
claims processed correctly," she says. "My decision was based on
customer service, because if it's not good, the insurance is
probably not going to work for us."

Employee Viewpoint
To find the package that best fits your business, it's important
to survey employees about what they really want, Michel says.
"Employee interests vary depending on company size, industry and
demographics, and you don't want to offer something that no one
will take advantage of," she says.

That's exactly what online retailer Zappos does to help achieve
its goal of happy and healthy employees, according to benefits
manager Bhawna Provenzano. Based on surveys of employees
throughout the year, Zappos determines which benefits are most
meaningful to team members, which benefits they would like to see
added and which are not being used or are no longer relevant.

"We make sure we include any suggestions that have been brought
to us by team members on the survey," Provenzano says. "All of
these things help us determine the direction our benefits plan
needs to go."

Michel cautions that there are laws that prohibit employers from
asking about health conditions, family histories and other topics
that may relate to insurance. Any survey of employees should have
questions that are general and related only to benefits, and
should be reviewed by an attorney before being distributed.

Once a benefits package is created, it must be communicated
effectively to employees. According to the 2011 Aflac WorkForces
Report, 46 percent of employees at small companies say their HR
departments communicate too little about employee benefits plans.

Michel says each business must determine the best way to get the
word out. "Whether you post it in the office, mail it to the
employees' homes or have a companywide meeting to roll out a
benefit, you need to be sure they understand the benefits and how
they work," she says.

Delorey emphasizes that the key to a high-performing benefits
package is for employers to understand their people and their
mission, and to align their benefits with both. He also urges
employers to realize that the more time and education they invest
in finding the right program, the better the payoff will be, in
the form of lower costs and quality plans.

"It's easy for employers to say, 'I have to go to this
established insurer and take this off-the-shelf plan,'" he says.
"But if you put a little more effort into it like you do some
other aspects of your business, you will be rewarded."

Benefits
Babble
Employee benefits programs can be confusing--in fact, they often
seem to operate with a language all their own. Here's a glossary
of some key terms.

Employee Retirement Income Security Act of 1974
(ERISA): A federal law that sets operating standards for
employee benefits plans.

Third Party Administrator (TPA): The person (or
organization) responsible for providing administrative services,
including processing claims, for employee benefits plans.

Wellness program: A group of services or events
offered by an employer designed to lower the number of claims and
claim costs by promoting improved health among employees. Such
programs may include health screenings, flu shots,
smoking-cessation groups and discounts on exercise classes and
diet plans.